Quickly understanding various charting forms and patterns is a valuable skill that futures traders need to cultivate. When the market is jumping, you often have only nanoseconds to make a trading decision. Successful futures traders learn to read and understand their charts at a glance. In the next few posts we’re going to go over some charting basics that are important to futures traders.
The Narrow-Range Bar (NRB)
In charting, a narrow-range bar is a bar with a smaller than normal range between the high and low. If you see a narrow-range bar on your charts, it indicates a dramatic decrease in market volatility and generally heralds a coming turn in the market. This is important to futures traders because strong moves often emerge from periods of low volatility. The sight of a narrow-range bar on your charts alerts futures traders that the winds of change are about to blow.
What a narrow-range bar looks like:
- In a western bar chart, the vertical bar is short and squatty, the protruding arms fairly close to each other.
- In a candlestick chart, the real body (cylinder) is so short it’s nearly square.
What a narrow-range bar tells futures traders:
- Buyers and sellers are nearly equal in power.
- Occurring after normal range bars, it indicates the imminent occurrence of a strong turn in the market. A market turn after the appearance of a NRB is generally more reliable.
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